Brazil tax reform: 1 key update — 4 mins
Hey, I’m Douglas, Editor-in-Chief of the Brazilian Tax Reform Portal 🇧🇷.
1) Transfer Pricing
The end of 2025 has arrived and, with it, the deadline for submitting transfer pricing ancillary obligations for the 2024 calendar year in Brazil.
The article written by Victoria Cascaes Brito and Antônio Moreno, published on the Portal da Reforma Tributária, details the consequences for taxpayers who fail to comply with this requirement.
With the entry into force of Lei nº 14.596/2023 and Instrução Normativa RFB nº 2.161/2023, many taxpayers — especially those who did not opt for the early adoption of the rules — faced, for the first time, the obligation to prepare and submit the Local File and the Master File, including through the e-CAC system. For multinational groups, obtaining information from foreign headquarters, such as strategic data and competitive advantages, made compliance even more complex.
MAIN PENALTIES
The text highlights that non-compliance may result in significant fines:
0.2% of gross revenue per month of delay for late submission of the Master File or Local File;
3% of gross revenue if the files are submitted but fail to meet regulatory requirements;
0.2% of the group’s consolidated revenue in the case of inaccurate, incomplete, or omitted information in the Master File;
A minimum fine of BRL 20,000 and a cap of BRL 5 million, which may apply per year of non-submission.
The authors emphasize that paying the fine does not eliminate the taxpayer’s default status regarding the ancillary obligation, nor does it prevent the Brazilian Federal Revenue Service from adopting additional measures to compel submission. In other words, payment of the penalty does not extinguish the underlying legal duty.
INDIRECT CONSEQUENCES
Beyond monetary penalties, failure to submit the files may trigger broader tax implications, such as:
Adjustments to transactions and comparability analyses;
Reallocation of functions, risks, and assets;
Disregard or recharacterization of transactions that would not have been entered into by unrelated parties acting under comparable circumstances;
Potentially higher tax assessments resulting from unfavorable adjustments.
IMPACT ON THE “COOPERATIVE COMPLIANCE” MECHANISM
The article also discusses the cooperative compliance mechanism introduced by the regulation. When the tax authority challenges a taxpayer’s transfer pricing calculations, it must issue a Notice of Findings granting a 30-day period for the taxpayer to amend its Corporate Income Tax Return (ECF) and Federal Tax Debt Statement (DCTF), exclusively with respect to transfer pricing adjustments.
However, this right to amend is conditional upon full compliance with transfer pricing rules, including submission of the Master File and Local File.
In practical terms, failure to submit these documents on time may:
Prevent amendments before an official tax assessment is issued;
Accelerate the issuance of a tax assessment notice;
Increase exposure to additional penalties.
As the authors write, non-compliance goes beyond the imposition of fines and may significantly affect a company’s defense strategy and overall tax risk.
🇧🇷🔍 Brazil is changing. Are you watching closely?
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